Posted on: 14th Mar, 2007 02:27 pm
I have a variable rate of 1.75 percent for one year and after that 4.45 rate above the index,
can you help me in translating what does this mean?
can you help me in translating what does this mean?
Your rate is based on one of the indexes such as mta, cofi, so after 1 year your rate will jump to the prevalent rate of that index plus the 4.45 which is called the margin.
This will be your fully indexed rate (FIR) after the initial 1 year period on your arm is over.
Suppose after 1 year the cofi index is at 2.6, then your rate will be 2.6 + 4.45 = 7.05%
Loan Advisor
This will be your fully indexed rate (FIR) after the initial 1 year period on your arm is over.
Suppose after 1 year the cofi index is at 2.6, then your rate will be 2.6 + 4.45 = 7.05%
Loan Advisor
You need to keep in mind that there are rate adjustment caps which restrict by how much the interest rate can increase.
There would be a first rate adjustment cap which will limit by how much the rate can increase at the time of first adjustment and also a cap on how much subsequent rate adjustments can be up to. For the arm it will also be specified by how much the rate can increase over the life of the loan which is known as the lifetime cap.
Like a 2/2/5 would mean that the initial adjustment can be maximum 2%, subsequent adjustments also can be of 2% and lifetime cap of 5% increase over the initial rate.
David
There would be a first rate adjustment cap which will limit by how much the rate can increase at the time of first adjustment and also a cap on how much subsequent rate adjustments can be up to. For the arm it will also be specified by how much the rate can increase over the life of the loan which is known as the lifetime cap.
Like a 2/2/5 would mean that the initial adjustment can be maximum 2%, subsequent adjustments also can be of 2% and lifetime cap of 5% increase over the initial rate.
David
Kst, 1.75% is the initial low rate applied on the variable rate loan. 4.45% is the margin which is added to the economic index linked to the variable rate loan.
The sum of the index and the margin gives the actual rate on the loan. The actual rate and payments on the loan vary with variation in the index. The margin on your loan will however remain constant.
The sum of the index and the margin gives the actual rate on the loan. The actual rate and payments on the loan vary with variation in the index. The margin on your loan will however remain constant.